Consumers looking to purchase a new home will often benefit by getting their credit score in shape.
While paying down debt and keeping old credit cards around are well-known ways to go about this, there are some other strategies individuals can use to save their scores, according to a recent CBS MoneyWatch column by Ray Martin. First, they should review any late payments on their accounts.
One late payment will remain on an individual's credit report for up to seven years. The older this negative information gets the less of an impact it will have on credit scores and the lenders that look at it. Therefore, it is important to make sure no new negative information appears.
Once these delinquencies are taken care of, consumers have the option of requesting their removal. Creditors are not required to satisfy a good faith adjustment request, according to the column, but it may be worth making such an appeal. Stressing an individuals' improved money management skills may serve as an effective argument.
Consumers may want to direct their payment efforts toward agencies that agree to make good faith adjustments.
"Pay off accounts where the collection agencies agree to remove all references to the accounts from the credit bureau files," Martin said. "Make this a requirement of your offer to pay off the account."
Credit limits are an important factor in calculating credit scores. Keeping all account balances well below this limit will benefit an individual's debt utilization ratio and serve their score well. Still, this is sometimes not enough.
Lenders are not required to report credit limits to the credit bureaus, according to the column. Those that do not do this will appear to have a credit limit of zero, which can be very harmful to consumers who build up balances on such accounts. Requesting creditors to report the limit may remedy this situation. Not all lenders will satisfy this type of request, making it advisable to transfer funds to a different account.
The type of account a consumer has access to can also have implications for their credit score. Department store credit cards often have low limits, according to the column, making it easy to build an unfavorable debt utilization ratio. Opening these accounts will also reduce the age of one's overall credit, and trim points from their score.
Credit is a factor in determining interest rates on all kinds of loans, from mortgages and new cars, to credit cards and insurance.